Washington is blustering into another season of debt-ceiling brinksmanship. Some congressional Republicans have said that they hope to use debt-ceiling negotiations to extract budget cuts. The Biden White House has so far rebuffed the idea of negotiating at all, saying that Congress must pass a “clean” debt-ceiling bill, without any other budgetary riders. Meantime, the clock ticks down to the day later this year when Treasury will exhaust all extraordinary measures to avoid an acute debt-ceiling crunch, unleashing a financial and economic tsunami. History suggests a possible offramp: incorporate a broader range of policy areas into debt-ceiling negotiations.
Arguments that there should only be a “clean” vote on the debt ceiling discount the long history of the issue getting bundled with other measures, especially during periods of divided government. The Balanced Budget and Emergency Deficit Control Act of 1985 raised the debt ceiling but also enacted numerous fiscal reforms. The debt ceiling was only one measure among many in the 1990 omnibus. During Bill Clinton’s presidency, debt-ceiling hikes were tied to broader pieces of legislation multiple times, including 1996’s Contract with America Advancement Act (CAAA) and the Balanced Budget Act of 1997.
The CAAA may be a particularly promising precedent for Republicans and Democrats seeking a debt-ceiling solution. In 1996, Republicans hoped to enact more of their Contract with America, Bill Clinton was up for reelection, and the debt ceiling loomed. In the opening months of that year, Congress passed a series of temporary increases to the debt ceiling in order to gain time for negotiations. At the end of March 1996, the Republican-controlled Congress wrapped a debt-ceiling increase into a bill that made reforms to Social Security (allowing workers in their late sixties to earn more money without having Social Security benefits reduced) and various changes to small-business regulations. At one point in the negotiations, the line-item veto had been packaged with these other measures, but Congress instead passed a separate line-item veto bill in the waning days of March.
Support for the CAAA was overwhelmingly bipartisan. Majorities of both the Republican and Democratic caucuses in the House voted for it, and it passed the Senate by unanimous consent. Applauding its passage, Bill Clinton said that the CAAA set the stage for future bipartisan efforts to reduce the budget deficit further. He portrayed brinksmanship over the debt ceiling as an impediment to—not a vehicle for—setting the nation’s fiscal house in order.
True, conditions were different in 1996. Bipartisan cooperation was more common, for one. The GOP congressional sweep of 1994 gave Republicans a much stronger negotiating hand than the 2022 midterms did. The Republican-controlled Congress already had a year of legislating under its belt by the time it turned to hammering out the CAAA in 1996.
But the overall contours of the CAAA may be well-suited to the political and fiscal landscapes facing Congress today. Controlling the House by the slimmest majority, Republicans have only so much leverage in debt-ceiling negotiations. Moreover, the political will is limited to make the kinds of changes that some Republicans say they want. Under current trajectories, balancing the budget in a decade would require significant cuts to entitlements, the elimination of much discretionary spending, tremendous tax-hikes, or some combination of the three. Sudden major cuts to federal programs could undermine Republican standing among working- and middle-class constituencies. Those spending cuts could be harder to maintain in light of continued U.S. support for Ukraine, and they would also interfere with the ability to maintain and extend U.S. defense commitments in the Pacific.
While it is possible that Republicans could wrangle some cost-savings out of debt-ceiling negotiations, they are unlikely to get anywhere near the amount that some fiscal hawks want. Further, proposals to take a cleaver to many federal programs could easily backfire on Republicans in the 2024 election cycle—and would be almost certain to go nowhere. Bipartisan initiatives to bend the cost curve on entitlements (especially Medicare) theoretically might be more politically feasible, but they have a longer tail, and an impending debt-ceiling crunch may not be an ideal backdrop for striking such a deal.
Finding other measures to attach to a debt-ceiling hike could be a way of defusing negotiations by giving Republicans and Democrats a way to notch wins. Prior to the 2022 midterms, House Republicans rolled out a “Commitment to America,” which called for actions on supply chains, domestic energy, health care, tech regulation, and other areas. Some provisions of that agenda have bipartisan potential—or at least they might not repel Democrats so much that they would balk at packaging them along with a debt-ceiling increase.
Some policy supplements might be more targeted. For instance, the Trillion Trees Act encourages the planting of more trees and enjoys bipartisan support on the Hill. Efforts to increase transparency in medical pricing might garner support across the aisle and help make a dent on medical expenses. Other areas in health policy and supply chains could also be a fruitful space for bipartisan collaboration. Last year, Arkansas Senator Tom Cotton, Minnesota Senator Tina Smith, and Oklahoma Representative (now Senator) Markwayne Mullin proposed the American Made Pharmaceuticals Act, which would encourage the production of pharmaceuticals in the United States. West Virginia Senator Joe Manchin has said that he hopes to roll out legislation to ensure that tax credits for electric vehicles under the Inflation Reduction Act will promote domestic supply chains. Using tax credits to promote industrial policy could appeal to some Republicans.
Other possibilities present themselves. Pro-family tax policies, smoother permitting for energy-production facilities, tech reform, other supply-chain programs, or efforts to promote vocational education could all be part of some greater legislative deal.
The precise contours of a hypothetical “Commitment to American Renewal” bill are, of course, up for debate. Proposals more overtly connected to the budget, such as modest caps on the growth of discretionary spending in select areas or the TRUST Act, might also be part of the deal. What would be most important about this kind of agreement is that it would offer a bigger bargaining table and a wider range of policies.
As with the 1996 debt-ceiling deal, one could make the case that many of these seemingly non-budgetary proposals could, over the long term, have budgetary effects. A broad package of bills could encourage more growth and indirectly help improve the social-safety net. As the budget is not walled off from American life as a whole, resolving budgetary issues requires more than green-eyeshade ninjutsu. Debt-ceiling brinksmanship focused merely on spending risks freezing negotiations. Expanding the range of policies could provide more flexibility and address underlying challenges.
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